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"VA Linux Systems, Inc. (Nasdaq:LNUX) today reported revenue of
$42.5 million for the second fiscal quarter, 2001, ended January
27, 2001, an increase of 111% over the same quarter of fiscal 2000.
VA Linux also reported a second quarter net loss, on a pro forma
basis, excluding non-cash and non-recurring charges, of ($0.28) per
share, compared to a loss of ($0.20) per share in the second
quarter of fiscal 2000. This net loss per share is within the range
indicated in the Company's press release dated January 16, 2001. VA
Linux also reported that it established additional reserves for
excess inventory and potentially uncollectible accounts receivable
of $14 million and $2.5 million, respectively."

"As we indicated on January 16, we have been affected by the
overall economic slowdown which has impacted demand for our
products and services," said Larry M. Augustin, CEO of VA Linux
Systems. "We have recognized the need to adapt to this new economic
environment. We have established reserves to address financial
exposures and we are restructuring the Company to better compete.
We intend to reduce our workforce by 25% from the 556 people we
employed at the end of calendar 2000 and will take a restructuring
charge in the fiscal third quarter as a result. The amount of that
charge will be determined later this quarter. The effect of the
restructuring will be to position the Company to achieve
profitability at lower revenue levels."

"We believe that the overall slowdown in IT spending will
ultimately create more demand for Open Source technologies among
enterprise customers as they tighten their IT budgets. Our
leadership in Linux and Open Source positions us to benefit from
the adoption of those technologies by large corporations."